10 Essential Accounting Safeguards for Small Businesses
When you run a small business, you naturally prioritize tasks that run “up and out”: What do I have to get out today to serve and gain more customers tomorrow?
Because your time is scarce, it’s harder to spend it on those “down and in” functions that tackle how your business operates on the inside.
Accounting processes are some of those foundational planks that are hard to make time for, but actually allow you to achieve more, faster. They give you peace of mind, and a clear path forward. And most importantly, they safeguard your business’ assets, as well as your employees.
We love helping clients develop procedures for their accounting needs, and not just to “check the box!” Often, these types of processes are more than documenting steps, they are revolutionary for the business.
Processes free up the guess work of who does what, when, and how–and give owners back a sense of control over their business’ direction. Having complete confidence in your financial records, knowing how to access that information and what to do with it, gives you invaluable peace of mind. And once you have clarity about your financial position, you can focus on the fun part: using it to develop creative strategies to meet your goals!
If you’re ready to implement some basic accounting controls for your small business, here are 10 essentials we recommend starting with:
Segregation of duties: Assign different responsibilities to different employees. For instance, the person who handles cash should not be the same person who reconciles bank statements.
Regular reconciliation: Reconcile bank statements, accounts payable, and accounts receivable regularly to detect any discrepancies or unauthorized transactions.
Dual authorization: Require two signatures or approvals for significant transactions or expenditures to ensure accountability and prevent unauthorized spending.
Limited access: Restrict access to financial systems, documents, and sensitive information to only authorized personnel. Use passwords, encryption, and physical security measures to safeguard financial data.
Inventory controls: Implement controls such as periodic physical inventory counts and reconciliations to prevent theft or misuse of inventory.
Documentation and record-keeping: Maintain accurate and detailed records of all financial transactions. Documentation should include invoices, receipts, purchase orders, and contracts.
Regular audits: Conduct internal audits or hire external auditors to review financial records and processes periodically. Audits help identify weaknesses in controls and detect any fraudulent activities.
Employee training: Provide training to employees on fraud awareness, ethical behavior, and the importance of following internal controls.
Vendor management: Verify the legitimacy of vendors and suppliers before conducting business with them. Monitor vendor relationships closely to prevent over billing or fictitious invoicing.
Budget controls: Set and monitor budgets for different departments or projects to prevent overspending and unauthorized expenses.
Many of these you can start working on today, with your current staff. But partnering with a fractional accountant–an impartial, outside expert–can also be a great way to establish new procedures, giving you more time to focus on your goals.
Breakaway advisors work with our clients to set up accounting controls that address each company’s unique needs. They can work with your current bookkeeping team, or operate as an independent, full service accounting department.
To learn more about what working with a Breakaway advisor could look like for your business, reach out. We’d love to meet you!
